CASE SUMMARY: Sunnova Energy Enters Chapter 11 to Sell All Assets, Wind Down Estates, Settle Dealer Claims; DIP Financing Remains Elusive, but Negotiations on DIP, Stalking Horse APA With Noteholders Ongoing

Relevant Documents:
Voluntary Petition
First Day Declaration (Mathews)
First Day Declaration (Omohundro)
Sale and Settlement Motion
Notice of First Day Hearing

Sunnova Energy International Inc., a Houston-based provider of clean energy services, and affiliates Sunnova Energy Corp. and Sunnova Intermediate Holdings, filed chapter 11 petitions on June 8, joining the company’s affiliate Sunnova TEP Developer, which filed its own petition on June 1.

According to the first day declaration of Sunnova CEO Paul Mathews, the debtors filed for chapter 11 to sell substantially all of their assets and wind down their remaining estates. The debtors also intend to settle the claims of their dealers with additional incremental financing being provided to nondebtor affiliate Sunnova TEP Holdings, or TEPH, and the sale of some “dormant” debtor assets.

The debtors say that they anticipate obtaining DIP financing from an ad hoc group of their noteholders, but the contemplated DIP facility provides only limited funding prior to entry of a final order. The debtors say they believe they need $100 million to fund an approximately 90-day chapter 11 process, including a 45-day sale process.

The debtors intend to fund the first three weeks of their cases with approximately $13.5 million of available cash on hand, along with the proceeds of a $15 million private sale of some of their solar systems to TEPH and the sale of solar systems installed on new homes by homebuilder partners. The debtors’ proposed budget is HERE.

Absent the sale of solar systems, the debtors say they expect to run out of cash on hand as early as the end of this week.

During the first three weeks, the debtors say, they will launch a marketing process for the sale of substantially all of their assets and will continue to negotiate the terms of potential DIP financing and a stalking horse purchase agreement with the ad hoc group of noteholders.

The ad hoc group of noteholders holds senior unsecured notes and convertible notes, according to Mathews, and in March accounted for more than 90% of each series of notes. The ad hoc group disbanded, however, and only a subset of the noteholder group remains.

According to the declaration of CRO Ryan Omohundro, the ad hoc noteholder group is reluctant to provide DIP financing and commit to purchasing certain of the debtors’ assets without obtaining the consent of KKR, the debtors’ term lender. KKR has consent rights for the sale of certain assets and is requiring a release in exchange for its consent. The debtors’ special committee is evaluating a broad release for KKR.

As explained by Mathews, the debtors use a network of about 450 dealers and contractors to market, sell and install their products. The debtors have failed to timely pay many dealers because of prepetition liquidity constraints, causing many dealers to stop building solar systems, which impedes the debtors’ ability to monetize them. The debtors estimate that they owe dealers approximately $367 million. The debtors seek to sell their right to settle dealer claims to TEPH, which along with its lenders will negotiate settlements with the dealers directly.

Mathews further explains that once a solar system is installed, the company owns either the solar system, subject to a lease or power purchase agreement, or the solar loan. The company then sells portfolios of solar systems and loans to tax equity partnerships, or TEPs, and other special-purpose entities, or SPEs, through a series of intercompany transactions and securitizes the cash flows generated by its interests in the portfolios by issuing asset-backed or loan-backed notes through the SPEs. The company then uses the proceeds of the notes to finance additional solar assets and loans, all while earning servicing and management fees related to the securitizations, which are the debtors’ primary source of revenue.

Mathews attributes the company’s need to file chapter 11 to “economic volatility, above-target inflation, prolonged high interest rates, and more recently, tariffs and uncertainty over the nation’s commitment to incentivizing solar power generation,” headwinds that have affected competitors as well.

The first day hearing has been scheduled for today, Monday, June 9, at 4 p.m. ET.

The case has been assigned to Judge Alfredo R. Perez.(case No. 25-90160). The debtors are represented by Kirkland & Ellis as general bankruptcy counsel, Bracewell LLP as co-bankruptcy counsel, Moelis & Co as investment banker and Alvarez & Marsal North America as financial advisor. The company’s special committee of the board is represented by Kobre & Kim as independent counsel and Province as independent financial advisor. Kroll Restructuring Administration is the claims and noticing agent.

Prepetition Capital Structure

The company reports in its petition $10 billion to $50 billion in both assets and liabilities, specifying that as of Dec. 31, 2024, it had $13.35 billion in total assets and $10.67 billion in total debts. As explained by Mathews, Sunnova has solar-related tax credits and employs different “sophisticated” financing structures to leverage its business that primarily consist of:
 

• Corporate-level unsecured notes;
   
• Tax equity partnerships, or TEPs, in which third-party investors commit capital for the purchase of solar systems in exchange for the assets’ residual cash flows and tax attributes;
   
• Nonrecourse revolving credit facilities called warehouse facilities that finance the company’s purchase of solar systems, solar loans and interests in the TEPs as well as fund working capital and reserve amounts; and
   
• Securitization facilities that issue asset- and loan-backed notes through nondebtor SPEs that are secured by the company’s solar loans and interests in TEPs.

Mathews says that as of the petition date, Sunnova, through the SPEs, has issued 12 active series of asset-backed notes that securitize the company’s membership interests in 26 TEPs and 14 active series of loan-backed notes, including two series that are partially guaranteed by the U.S. Department of Energy.

As of the petition date, the company has approximately $8.9 billion in funded debt obligations, consisting of $2 billion of debtor funded debt obligations and $6.9 billion of nondebtor funded debt obligations. The debtors have approximately $13.5 million in available cash.
 

The company’s nondebtor funded debt obligations are shown below:
 

Nondebtor funded debt includes (i) a $550 million RCF with SLA Management, as manager and servicer, and Atlas Securitized Products Administration, or Atlas, as administrative agent, called the SLA facility and (ii) a $1.675 billion back leverage RCF with TEPH, as borrower, and Atlas, as administrative agent, called the TEPH facility.

The company is publicly traded on the New York Stock Exchange under the stock ticker NOVA. Approximately 126 million shares of common stock and 200,000 shares of Series D preferred stock are outstanding as of the petition date.

Mathews’ declaration includes the following organizational structure, including the positions of the company’s TEPs, securitization SPEs, servicer entities and warehouse facilities. Details on the construct of TEP/securitizations are discussed HERE.
 

Background / Events Leading to Bankruptcy Filing

Sunnova, founded in 2012, began providing solar energy services in April 2013 and went public in July 2019. At that point, the company was serving 63,000 customers. Today, Mathews says, the company’s solar systems, described HERE, “hold more than 2,892 megawatts of generation capacity – enough to power the city of Chicago,” and the company has over 440,000 customers.

Sunnova historically operated along five lines of businesses, according to Mathews. It leased solar systems to customers with long-term fixed monthly payments, sold power to customers through long-term power purchase agreements, or PPAs, and provided solar loans to customers to finance the purchase of its solar systems. The company also installed solar systems for new home buyers and sold warranty and service agreements to customers.

As of Dec. 31, 2024, approximately 31% of Sunnova’s customers had solar leases, 28% had PPAs, 24% had solar loans, and 12% percent had service and accessory loan agreements. The remaining 5% purchased Sunnova products in cash.

As of the petition date, the company is party to almost 175 dealer contracts. The debtors explain that dealers are typically paid in two installments upon completion of certain milestones. Due to prepetition liquidity constraints, the debtors were unable to pay dealers for many solar systems, and many dealers stopped building solar systems, which eliminated the debtors’ ability to monetize them. The debtors estimate that there are approximately 22,000 solar systems stalled as of the petition date and the debtors owe approximately $367 million on account of prepetition claims for unpaid services and materials held by the dealers.

Mathews says the business grew to a point in 2024 where gross revenue exceeded $840 million sustained with “billions of dollars in active customer contracts.” However, Mathews attributes the need to restructure to economic volatility, inflation, prolonged high interest rates, tariffs and “uncertainty over the nation’s commitment to incentivizing solar power generation.”

Specifically, the “high-growth strategy” that allowed the company “to cement its place as a market leader made it difficult to preserve cash,” Mathews says. As the company’s cash position deteriorated, unpaid balances to dealers grew and dealers halted construction projections, which blocked critical revenue streams.

Mathews also notes that in 2024, “appetite for new tax equity financing” diminished, which put further pressure on the company. Mathew explains that the “current presidential administration has indicated that continued subsidization of the solar industry, and the industry’s overall success, are not federal government priorities,” which has created uncertainty about the future availability of federal tax credits and tightened the tax equity market.

In December, the company explored liability management and recapitalization options, but its rapidly eroding cash led it to pursue a marketing process for incremental liquidity instead. It ultimately closed a $185 million bridge term loan from KKR in March.

At the same time, the company started an operational restructuring to reshape its business model, with a focus on profitability and cash flow. The effort led the company to lay off more than 50% of its employees and divest underperforming and noncore segments, including solar loan origination, the company’s commercial-grade business and the company’s partnerships with homebuilders to install solar systems in new homes.

According to Omohundro, by mid-March, the company was facing “critically tight” liquidity that threatened its ability to satisfy its upcoming cash obligations, including a $24 million interest payment due under its 11.75% senior notes and various payments totaling $170 million under the SLA facility.

On March 3, the company included a going-concern warning in its form 10-K filed for fiscal year 2024. On April 1, the company chose to forgo the interest payment due under the 11.75% senior notes and entered a 30-day grace period.

On April 21 and April 22, Atlas sent the company notices of default under the TEPH facility and SLA facility, respectively, which terminated lender commitments and instituted default interest for the nondebtor borrowers under each facility. As a result of the defaults, no cash may be distributed from TEPH or SLA to the debtors. The debtors were also unable to satisfy the conditions precedent to receive funding from the TEPs.

Omohundro says that in the weeks and months leading to the petition date, the debtors engaged in extensive negotiations with third parties and their major constituents, including an ad hoc group of noteholders that at the time represented 90% of each of the notes, Atlas and certain of its affiliates as administrative agent and lenders under the TEPH facility and SLA facility, and KKR as the lender under the KKR facility. Mathews notes that the ad hoc group of noteholders disbanded in March, but an “Ad Hoc Group of Certain Noteholders” remains.

According to Omohundro, KKR ultimately informed the debtors that it was not willing to extend additional financing, Atlas informed the debtors that it was going to focus on resolving and funding certain dealer-related obligations but would not provide additional financing, and the ad hoc noteholder group informed the debtors that it would not fund DIP financing focused on a prearranged plan but would consider DIP financing to fund a credit bid in a chapter 11 sale process.

Omohundro explains that under the KKR facility, the debtors cannot sell certain assets or pledge certain of their interests for the benefit of a third party without KKR’s consent. The debtors, the ad hoc noteholder group and KKR negotiated the conditions for KKR to provide such consent, which includes a comprehensive release by the debtors of their potential claims against KKR arising under the KKR facility.

However, Omohundro continues, a special committee appointed by the board on April 11 is still conducting an independent investigation and will determine whether the KKR release is appropriate. Without obtaining KKR’s consent for the transaction, the ad hoc noteholder group is reluctant to provide DIP financing and commit to purchasing certain of the debtors’ assets, Omohundro says.

The debtors’ largest unsecured creditors are as follows:
 

10 Largest Unsecured Creditors
Creditor	Location	Claim Type	Amount
Wilmington Trust, National Association	Minneapolis	2.625% Convertible Senior Notes Due 2028 + Interest	$   603,981,250
Wilmington Trust, National Association	Minneapolis	0.25% Convertible Senior Notes Due 2026 + Interest	575,722,743
Wilmington Trust, National Association	Minneapolis	11.750% Senior Notes Due 2028 + Interest	431,463,889
Wilmington Trust, National Association	Minneapolis	5.875% Senior Notes Due 2026 + Interest	405,940,278
Trinity Solar	Wall, N.J.	Dealer Payable	78,747,427
Windmar PV Energy Inc	San Juan	Dealer Payable	54,056,595
Power Solar LLC	San Juan	Dealer Payable	28,183,194
V3 Electric Inc	Folsom, Calif.	Dealer Payable	13,601,468
Sunnymac LLC	Wilmington, Del.	Dealer Payable	9,854,519
Aon Risk Services Southwest Inc	Chicago	Trade Payable	8,609,489 (estimated)

The case representatives are as follows: